Argument preview: Politics and public money

At 10 a.m. Monday, the Supreme Court will hold one hour of oral argument on the constitutionality of using public funds to subsidize political candidates — a case with broad implications for campaign finance.  Two consolidated cases from Arizona (10-238 and 10-239) are under review.  Arguing for the challengers to subsidies will be William R. Maurer, a Seattle attorney with a legal advocacy group, the Institute for Justice.   Arguing for the state of Arizona will be Bradley S. Phillips of the Los Angeles office of Munger Tolles & Olson.  He will share 10 minutes of time with William M. Jay, an assistant to the U.S. Solicitor General, speaking for the federal government as amicus.

Background

Money, everyone knows, talks.  And money in politics is, according to the Supreme Court, a form of campaign speech that is protected by the Constitution’s First Amendment.   Since first specifically equating campaign spending with free speech 35 years ago (in Buckley v. Valeo), the Court has been returning repeatedly to the issue of just how much protection political financing gets constitutionally. 

That  is a deeply controversial topic, and, no matter how the Court rules on it in any given case, it disappoints or angers someone because each such ruling has the potential to alter basically the ground rules for money in politics.   A decision  by the Court last year, clearing the way for unlimited spending by corporations in federal elections (Citizens United v. Federal Election Commission) is believed to have played a major role in the nationwide success of business-favored Republican congressional candidates last November.

Just 14 months after deciding Citizens United, one of history’s most controversial rulings on campaign money,  the Court is wading into the legally murky waters of publicly financed campaigns — that is, the direct transfer of taxpayer funds from the public treasury to candidates for elected office.

Few topics in political finance these days separate the pros and the antis more deeply than public subsidies.  To those in favor, subsidies may be the last real hope for keeping the moneyed “special interests” from buying America’s elections.  To those opposed, subsidies are the best invention yet for the government to choose up sides, helping favored candidates and stifling their opponents.

Making it harder to understand this constitutional debate is the fact that both sides claim that what is at stake for them is free speech, and each is claiming that the other side wants to curtail political speech.  Poorer candidates are said to need subsidies so they can project their voices to the voters against rich rivals.  Privately funded candidates are said to be driven to speak less so as not to trigger a taxpayer donation to their subsidized rivals.

The Supreme Court has actually issued only one ruling on public financing of candidates; it did so in one section of its historic decision in Buckley v. Valeo in 1976.  In Buckley, the Court upheld a system of transferring taxpayer donations (through a tax return check-off) to presidential candidates who were willing to keep their campaign spending within specified federal limits.  The Court there treated the subsidy system as a reform measure, remarking with approval that Congress had created that system “to reduce the deleterious influence of large contributions on our political process, to facilitate communication by candidates with the electorate, and to free candidates from the rigors of fund-raising.”   The system, the Court said, actually supports the “general welfare” of the country.

But that measure had been attacked in Buckley by those who had been left out of the subsidies — minority parties and those running independently of political parties — and who wanted to share in the taxpayer donations.  The new challenge now before the Supreme Court is by those who believe that public financing of candidates is not a “reform” at all, but a corruption of the campaign process by putting the government’s thumb on the scale to support one side:  that is, those who get the subsidies.

The subsidy system that the Justices are now ready to review was, in fact, believed to be a reform measure when Arizona’s voters narrowly approved it (by a 51-49 percent margin) in a statewide initiative in 1998.  After a series of scandals over financing of state campaigns, resulting, among other woes, in criminal prosecution of two governors and a number of state legislators, voters went to the polls to vote on a measure titled the “Clean Elections Act.” Backers promoted the Act with a pamphlet arguing that the Act would free politicians to represent the public’s interest, and not just the interests of those who gave large contributions to their campaigns.  The pamphlet tied the Act directly to the recent scandals, saying that the cycle of campaign finance abuse had seemed endless.

The Act went into effect in 2000, and as many as two-thirds of state candidates thereafter have opted into the subsidy system.  The system was used in every state election after 2000 — until the elections of last November, after the system had been blocked by a temporary vote of the Supreme Court last June 8.  The system remains on hold, and cannot be used unless it survives the constitutional review that the Supreme Court is carrying out this Term, in the consolidated cases of Arizona Free Enterprise Club, et al., v. Bennett, et al. (10-238) and McComish, et al., v. Bennett, et al. (10-239).

The Arizona subsidy scheme applied in races for governor, lieutenant governor, attorney general, state school superintendent, state legislaure, and several other state offices.  The Act creates a Citizens Clean Elections Commission to enforce the law.

Under the Act, candidates for state offices can opt to seek public subsidies, but they do not pay for their campaigns entirely with public funds.  They qualify for a subsidy by raising a specified amount in private donations, each of which can be no more than $5.  And their campaigns can spend no more, in total, than ceilings provided by state law, and, once they start receiving subsidies, they cannot raise any more private funds.   An initial subsidy is paid out of state funds, and the candidates are initially limited to spending only that amount.

Added to that — and this is the part of the Act directly under challenge in the new cases — is a “matching funds” provision, and the triggering mechanism that initiates that added feature.   If a subsidized candidate has an opponent who is paying for his or her own campaign (“self-financed”), the subsidized candidate qualifies for an additional subsidy if the other candidates’ spending exceeds the amount of the initial subsidy.  However, there is a ceiling on the amount of added subsidy: it can only be twice the initial subsidy amount, and 6 percent of an added subsidy is deducted to cover expenses.

The actual “trigger” for extra public funds can occur by either the spending of the self-financed candidate directly, or by independent groups that support that candidate if the amount such groups spend added to that of the candidate exceeds the initial subsidy amount.   The system works for each self-financed candidate running against a subsidized candidate.  If an independent group supports the subsidized candidate, no offset through a subsidy would go to the self-financed candidate.

The matching fund part of the Act was challenged in federal court by six past candidates, or future would-be candidates, for state offices who had run or planned to run self-financed campaigns.  Similar challenges were pursued by two political action committees that planned to support such candidates — the Arizona Free Enterprise Club’s Freedom Club PAC, and the Arizona Taxpayers Action Committee.  Other challengers were two individuals — State Treasurer Dean Martin, who had been a candidate for governor, and a state representative, Rick Murphy, who had run self-financed campaigns.   The constitutional claims were based on the First Amendment’s free-speech clause, and the Fourteenth Amendment’s guarantee of legal equality.

U.S. District Judge Roslyn O. Silver of Phoenix struck down the matching funds provision in August 2008, on the First Amendment claim.  She postponed her ruling, so it did not stop matching funds in that year’s state elections.  In a further ruling in January 2010, she formally blocked enforcement but again put the ruling on hold to allow the state and the state’s Clean Elections Commission to appeal to the Ninth Circuit Court.  Judge Silver agreed with the challengers that the matching funds scheme imposed a burden on the free-speech rights of self-financed candidates and their supporters, by leading them to curtail their speech activity in order to avoid triggering an outlay of public funds to be used against them.

The Circuit Court kept the Silver decision on hold in January 2010, and then, on May 21, 2010, overturned her decision, upholding the matching funds scheme.  In a divided ruling, the Circuit Court found that the burden on self-financed candidates would be minimal.   (Neither the Circuit Court nor Judge Silver ruled on the equal protection challenge.)

The matching funds provision was already under way in the 2010 state campaign, with a new installment of funds scheduled to go out to subsidized candidates.  The challengers, however, persuaded the Supreme Court to block that payment.  In the June order, the court lifted the stay on Judge Silver’s decision nullifying the matching provision, and blocked the Circuit Court decision in favor of the provision from going into effect.   At that time, the challengers had not yet filed their appeal to the Supreme Court, so the June order took no position on the merits of the constitutional dispute.

Arizona candidates went through the remainder of the 2010 campaign without the subsidy system in effect — the practical effect of the Supreme Court’s order.

Petitions for Certiorari

The two Arizona PACs, along with past or future candidates Martin and Murphy, filed one petition in the Supreme Court last August 17, and three candidates in the 2010 election — state representatives John McComish and Nancy McLain and legislative candidate Tony Bouie — filed a second the same day.  Each asked the Court to rule on two free-speech questions.  The PACs’ case aimed one question at the trigger when it is set off by the spending of independent groups supporting self-financed candidates, and one at the trigger activated by the self-financed candidates’ own spending.  The three candidates’ case keyed its first question to the effect it claimed the trigger had — forcing them to finance hostile speech by their subsidized opponents — and the second question at the supposed motive for the scheme — leveling the political financing field.

The petitions argued that a direct conflict had developed over such matching funds schemes, with the Second and Eleventh Circuits refusing to follow the Ninth Circuit; those other appeals courts have struck down public financing laws, in Connecticut and Florida.   (The Second Circuit case, Green Party v. Lenge, et al., is now pending at the Supreme Court, docket 10-775, but presumably will be held for action until the Arizona case is decided.)

“Resolution of this split,” the PACs’ petition argued, “is imperative because there is currently significant uncertainty regarding the constitutionality of public financing laws employing matching funds subsidies across the nation.  For independent groups, countless candidates running in states and municipalities across the country with such systems, and lawmakers who may attempt to implement similar laws in the future, timely clarification of this area of the law is imperative.”

Both petitions rely very heavily — as did the Second and Eleventh Circuits in their recent rulings against subsidies — on the Supreme Court’s 2008 decision in Davis v. Federal Election Commission (07-320).  That case did not involve candidates’ access to public subsidies; it involved candidates who finance their campaigns with private money.  But it did involve the campaign effects when one candidate’s money comes mainly out of his or her own pocket.  In that ruling, the Court, by a 5-4 vote, struck down the so-called “Millionaire’s Amendment” — a provision included in the wide-ranging federal campaign finance law that Congress had passed in 2002.

Before 2002 and that Amendment, federal law treated candidates running for Congress equally: every candidate had to abide by the same ceilings on the contributions their campaigns could take in from outside donors, and on the amount of campaign spending a political party could make in coordinated with a candidate.   Under the 2002 law, however, a candidate running for the House of Representatives against a self-financed candidate (a supposed “millionaire”) and the self-financed candidate would each be governed by different requirements.

If the self-financed candidate spent from personal funds beyond a specified amount ($350,000 for a House candidate), that candidate had to abide by the normal ceilings on contributions that he or she could accept from private donors, but the candidate running on donations from others could raise triple the ceiling amounts, even from individuals who had already given the maximum donation, and could coordinate spending with a political party without any limit.  The self-financed candidate also had more rigorous disclosure requirements enforced by the Federal Election Commission.

Striking down both the differing financial rules and the differing disclosure duties, the Court majority said: “We have never upheld the constitutionality of a law that imposes different contributions limits for candidates competing against each other.”  To do so under a regime created by Congress, the opinion by Justice Samuel A. Alito, Jr. explained, would mean that Congress, not the voters, would be determining whom to favor or not favor in a campaign.   And, the opinion added, the differing restrictions would put “a drag” on the free-speech rights of the self-financed candidate.    Justice Alito treated the differing treatment as an attempt to “level the playing field” in campaign finance, and noted that the Court had rejected that rationale as far back as the Buckley decision in 1976.

The dissenters argued that the Amendment did not stifle the speech of any candidate; the self-financed candidate, they said in an opinion by then-Justice John Paul Stevens, could use his or her own money to pay for as much political speech as desired, as Congress had put no limit on that.

The petitions in the Arizona cases argued that the Alito opinion had settled the issue of whether different financing conditions imposed on candidates would, in fact, have the effect of restricting the campaign speech of the disfavored candidate.  The only ways a self-financed candidate could prevent the state from helping to put out the message of the subsidized candidate — a “windfall” — would be to reduce the volume of his or her own speech, or at least to rearrange the timing of the speech, with negative effect.  Either of those restraints, the petitions argued, would impose the campaigning burden that the Supreme Court had found unconstitutional in the Davis case.

The McComish petition put heavy stress on the Supreme Court’s Citizens United ruling last January, arguing that it reinforced the Davis conclusion that candidates cannot be treated differently, based on their differing identities or characteristics, and also reinforced the Court’s long-standing refusal to allow Congress to try to “level the playing field” in campaign finance.   The PACs’ petition also relied on Citizens United, saying that it reinforced the view that spending by candidates unconnected to a political party cannot be regulated on a theory that they may corrupt the political process.  “Independent expenditures,” it said, “are core political speech and pose no threat of corruption…”

Arizona state officials urged the Supreme Court to deny review of both petitions, arguing that the differences in federal appeals court rulings on campaign subsidy cases grew out of “peculiarities” of different state laws, so there actually is no split on “rules of law.”   They also contended that the Ninth Circuit correctly applied prior Supreme Court precedents, including Davis and Citizens United, and did so by relying upon a valid anti-corruption rationale, without imposing differing requirements on different candidates.  And, the state’s opposition noted, the Davis decision did not involve public funds at all.

The Clean Elections Institute, Inc., a private, non-profit group that was set up to carry on the work of the group that had sponsored the 1998 campaign for the Clean Elections Act (and has intervened in the Arizona cases in lower courts), made the same arguments as state officials had, putting some added emphasis on the argument that the challengers had offered no significant evidence that they had changed their campaign tactics to their detriment because of the subsidizing of their rivals.

Merits Briefs

The combined brief on the merits of all of the Arizona challengers focused most heavily upon the burden they contended is imposed on them by the subsidy scheme.   The brief opened with these colorful statements: “Public financing in Arizona’s matching funds systems forces a yoke around the neck of traditionally funded candidates.”  When they spend campaign money above the specified limit, they are “literally force[d]…to press a button on their computer that will trigger the payment of subsidies to the very participating candidates they oppose.”  What they are then doing, it added, is helping to spread their opponents’ private political message as a consequence of their own free speech during the campaign.  Their own labor and campaign resources are the trigger for aid to their rivals, it contended.

And, in summarizing its legal arguments, the brief began with a quotation from former Arizona Gov. Janet Napolitano, who had joked that she was “the only Democratic governor in the country for whom George Bush has held a fundraiser,” because an event for her opponent, with President Bush as the speaker, raised enough money that it triggered a $750,000 matching payout for Napolitano.

That, the brief summed up, is punishment, because it works as a deterrent on a non-subsidized candidate’s campaign.  Being the instrument for “dissemination of ideas one opposes or abhors” is a severe condition on the right to run for office and spend money on campaign speech, the brief argued.  This is compelled speech of a kind that the Supreme Court has clearly condemned, it asserted.

Moreover, the brief went on, there is no proof that the Arizona system serves any anti-corruption rationale.  The only goal it does serve, the brief said, “is to level electoral opportunities, resources and influence.”

Although the Supreme Court has sometimes upheld campaign finance restrictions by finding that they satisfied more relaxed standards of constitutional review, and the Ninth Circuit did so in upholding the Arizona matching trigger, the challengers’ merits brief urged the Justices to use the toughest standard — “strict scrutiny.”  The Arizona triggering mechanism, it argued, “is a content-based speech regulation that disfavors certain speakers.”

Arizona’s brief on the merits opened with a recitation clearly designed to defend the Clean Elections Act as a reform-minded law that directly attacked a record of scandal in state politics.   The strategic aim, of course, was to attempt to show that the Act was not designed to put candidates on an equal footing financially, but rather to assist candidates who are willing to run campaigns without relying upon the heavy money that previously had caused “a seamless interplay between fund-raising and lawmaking” — in essence, the kind of “quid pro quo corruption” that the Supreme Court has upheld as a rationale for restricting campaign money flows.

The brief, while conceding that the Davis decision used a “strict scrutiny” standard of review, urged the Court not to use that test for the Arizona scheme, arguing that Davis was all about treating competing candidates differently in a way that clearly discriminated against the disfavored candidates.   The Arizona matching fund system, it contended, is simply a means of allocating public funds among candidates who seek them, in return for avoiding private fund-raising.   Tying the amount to the overall flow of money in a given campaign, it contended, does not amount to a penalty on anyone.

The Clean Elections Institute’s brief on the merits echoes some of those same themes, but put more prominent emphasis on the adequacy of a less rigorous standard of review.   There is no direct regulation of speech under the Arizona approach, it argued; and, it asserted, there is no discrimination since Supreme Court precedents do allow states to have different regulatory systems for candidates who accept public funds and those who do not.

The Justice Department has entered the case to join in the defense of public financing options in campaign laws.  It has an interest in the case, the government’s merits brief argued, because there are now systems of public financing for presidential elections.  And, while the federal scheme does not involve a trigger mechanism like Arizona’s, the government noted, Congress has considered — and both houses have passed (though not in final form) — legislation that would adopt such a mechanism.

A dominant theme of the Department’s brief is that the Court should not apply a “strict scrutiny” standard of review, because that is appropriate only for a “severe burden” on free speech activity and, it argued, there is no such burden under Arizona’s approach.  The absence of any direct restriction on candidate speech, the brief said, takes it outside of all prior strict-scrutiny cases, including Davis, upon which the challengers rely.

At most, it suggested, the working of the subsidy in Arizona may create a “disincentive” for self-financed candidates to engage fully in campaign speech, but that is a “strategic choice” about speaking that has never had a high level of First Amendment protection.  Self-financed candidates in Arizona, it argued, “are not required to pay for, to disseminate, or to identify themselves with their opponents’ messages.”

The government brief, noting that the challengers had conceded that they would have no constitutional complaint if the government simply wrote checks to candidates taking part in the system, not keying the amounts to what self-financed candidates did, argued that Arizona has simply adopted an alternative that limits the amount of public funds going into campaign finance.   The government also sought to rely on the Buckley precedent’s approval of the presidential subsidy scheme, saying that Arizona’s approach could satisfy the standard of “exacting scrutiny” that the Court applied in Buckley.

Aside from the federal government’s brief, the cases have drawn a considerable outpouring of other amici briefs, with a slight numerical edge to the supporters of Arizona’s approach and public subsidies in general. There is a detectable ideological cast to the majority of these filings: conservative organizations or individuals (and the GOP minority leader of the U.S. Senate, Kentucky’s Mitch McConnell) have lined up with the challengers, and liberal or progressive organizations or individuals (including some former self-financing candidates) have chosen to side with Arizona — with some notable exceptions.

There is also a distinct division among the dueling amici on what causes corruption in American politics.

For those allied with the challengers, government restrictions on campaign finance are no longer permissible unless they only attack “quid pro quo” corruption: in other words, donations that buy public policy favors.  As Sen. McConnell’s brief put it, “This case presents an important opportunity for the Court to reaffirm that the only government interests compelling enough to justify restrictions in campaign spending are the prevention of corruption or the appearance of corruption.  Further, the Court can and should clarify that the anti-corrruption interest is narrow, and confined only to prohibiting the exchange of money for political favors.”  It is clear that those that have grown deeply skeptical of campaign finance regulation see the Arizona cases as a signal opportunity for narrowing the anti-corruption rationale, which Sen. McConnell has been pressing for years.

For those allied with Arizona, government restrictions on campaign finance are viewed as an entirely valid method of reducing dependence upon large donors, with the ever-present fear — and perhaps the probability — of undue influence on elected policymakers.  As the Campaign Legal Center and a variety of other reform-oriented groups put it in their brief: “Public financing serves the compelling governmental interest in preventing the political corruption often endemic to elections that rely on private financing.”   It is apparent, from the tone of many of the briefs on this side of the cases, that there has developed a genuine fear among supporters of public finance that the very idea is under siege now.

Analysis

The five-Justice majority that decided both Davis and Citizens United is intact.  The simple question that arises in the Arizona cases, therefore, is whether those five will place the Arizona scheme side by side with what Congress did in those prior disputes and come to the same conclusion.  As the briefing in the new cases has indicated, there are ways to read those prior precedents as directly on point, or as easily distinguished.

The prevailing Court majority on major campaign finance case is, it is clear, deeply skeptical of such laws when they treat candidates differently based on their identity — Davis said personal wealth could not be a basis for discrimination, and Citizens United said that corporate wealth could not be, either.  But the Arizona scheme, even by the description of its challengers, only indirectly could be said to single out the wealthy.  A candidate who has a fortune could still opt to take public subsidies, if he or she were willing to forgo private financing.

So the fate of the challengers’ case would appear to depend, heavily if not exclusively, upon whether the five-Justice majority from the two key prior precedents will accept the argument that Arizona’s scheme necessarily does two things: (1) it turns self-financed candidates into unwilling financial backers of the subsidized candidates, and (2) self-financed candidates will actually shut down parts of their campaigns to avoid that fate.   There are ways, of course, that the evidence in the case can be read to show those consequences, but that is not an interpretation free of some doubt.  The evidence does not have the either/or, black/white character that it did in both Davis or Citizens United; there is no excluded class of disfavored candidates.

If there is anything that does seem predictable about the outcome of the Arizona litigation, it is that the Court probably will focus very closely on the terms of the Arizona scheme, and on the evidence in the record, rather than saying anything final about public subsidies in general.  There almost certainly is no risk that the Court will overrule the part of Buckley v. Valeo that spoke approvingly of the public treasury as a source of some campaign financing; no one has asked it directly to do that, and that would not be necessary for it to rule against the Arizona approach, if that is how it is inclined.